The hot blast of blowback from Wells Fargo’s acquisition of Wachovia is flattening the banking landscape. This bout of graft disguised as a merger benefits only the insiders while allowing the outsiders to foot the bill.

First it creates an overnight mutual fund monopoly for Wells Fargo. Witness:

A transaction overview released today by Wells Fargo, titled “A Superior Deal for Shareholders,” emphasized the mutual fund side of the deal. According to the San Francisco-based financial services giant, it had $151.3 billion in mutual fund assets as of June 30, while Wachovia’s Evergreen Investments subsidiary had $107.1 billion.

But this nice ancillary benefit was just an accidental consequence of the sheer size of the company emerging from the deal. The real story is about taxes – it’s crime as usual with all the customary connections and cover ups.

First Robert Steel, the non-banker turned CEO of Wachovia, was Secretary Paulson’s long time right hand man at Treasury and Goldman Sachs. Next came the collusion between the IRS, Treasury and the banks to change the tax law in a closed-door back-room session. Observe:

This new rule apparently allows Wells Fargo to accelerate the use of Wachovia’s huge write-downs as an offset to their own income, saving Wells Fargo a substantial amount in taxes over the next several years.

Yep, it’s a substantial amount to say the least. Just at the very moment when the national debt is exploding because of bank bail outs, money that Wells Fargo would have paid in taxes is being used to buy Wachovia.

Another significant aspect of the deal is its timing. On Sept. 26, after reviewing Wachovia’s books, Wells Fargo balked and walked, leaving the mess to Citigroup. Then on Sept. 29, the IRS changed the rules to allow Wells Fargo and Wachovia out of taxes. Then on Oct. 3, with all eyes on Congress passing the bailout bill, Wachoiva slipped into Wells Fargo’s dirty pockets in what was sold as a merger.

Meanwhile, as the ponzi wheel turns the FED spins right along as well. ‘No cost to taxpayers’ is suddenly the hip battle cry du jour:

In announcing its acquisition, Wells Fargo on Oct. 3 issued a press release, which stressed that — unlike the Citigroup offer — its acquisition “requires no financial assistance from the Federal Deposit Insurance Corporation or any other government agency.

In a conference call with Wells Fargo investors the same day, Wachovia Chief Executive Robert Steel said the takeover “poses no cost to the United States taxpayers.”

Two days later, Wells Fargo issued another press release saying that its merger, “in stark contrast to Citigroup’s proposal … does not demand financial support from our government.”

Oh, so that’s why the IRS changed the tax law with Steel, Paulson and the FED looking on. The fact that Wells Fargo did an about face on the deal, just after the tax law changed, is all coincidence?

Not on my planet.

The only thing to motivated Wells Fargo to acquire Wachovia was the tax law change. That’s a cute little way to “recapitalize” the banking system and the real reason Wells swooped to claim the rotting carcas of Wachovia from the jaws of Citigroup. Well that perhaps some of strong-arm twisting by Treasury to save one of their own.